Recent success of linear subband coders is mainly attributed to the invention of data organization strategies exploiting the underlying dependency across subbands thus raising the PSNR 1-3 dB above transform coders. Nevertheless, they suffer from the ringing effect at low bit rates caused by linear filtering. In this paper, we propose a novel hierarchical image decomposition and quantization scheme which exploits the advantages of both linear and morphological filtering in eliminating the ringing effect and maintaining good texture representation. More importantly, the proposed morpho-subband decomposition scheme enables the incorporation of quantization into the decomposition. As a result, all existing algorithms to efficiently represent wavelet coefficients can be applied to representing the so-called morpho-subband coefficients as well. This increases the PSNR by 2-3 dB compared to existing morphological-linear subband decompositions reported in the literature.